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Thursday, November 17, 2011

“DEEP DRILLING, DEEP POCKETS-------- IN CONGRESS”

A faction of the natural gas industry has invested more than $747 million as part of a 10-year lobbying and political spending campaign to persuade federal authorities to ignore the dangers of hydraulic fracturing, or “fracking,” a rapidly expanding but poorly regulated method of tapping gas reserves.

Fracking involves injecting a mix of sand, chemicals, and water into a well at high pressure in order to break up underground rock formations and free up natural gas. Pollution may occur underground, with fracking chemicals or methane directly contaminating aquifers and drinking wells, or above ground, as streams or tributaries are polluted by spills or improper wastewater disposal.

Nationwide, more than 1,000 complaints of water contamination due to fracking have already been reported.1 Natural gas obtained from fracking and horizontal drilling in shale deposits – a combination which produces massive amounts of toxic wastewater – will rise from 16 percent of all U.S. natural gas production in 2009 to 45 percent by 2035, according to the U.S. Department of Energy.2

Despite the pollution risks, the industry has argued that regulatory exemptions for fracking are needed to give America the opportunity to tap vast reserves of natural gas that have been previously unobtainable, generate millions of new jobs, reduce energy costs for the American consumer, and dramatically reduce America’s dependence on foreign oil. This is an impressive list—suggesting a “cure-all” for some of America’s biggest domestic and foreign challenges.

From 2001 through June 2011, the fracking industry gave $20.5 million to current members of Congress and spent $726 million on lobbying.

Such promises have helped the natural gas industry “systematically exempt themselves from most major environmental laws,” according to Dusty Horwitt, Senior Counsel for the Environmental Working Group, and author of the 2010 study “Drilling Around the Law.” With little federal regulation in place, the public has been left to rely on industry promises to limit the use of harmful substances in the fracking process—promises which have been repeatedly broken.

The EPA is scheduled to publish new, preliminary findings about the potential dangers of fracking in 2012. That gives the natural gas industry a powerful incentive to increase its political spending now in an attempt to shape public opinion and the debate over fracking in Congress, as well as affect the outcome of the 2012 Congressional elections. Doing so will be much easier after last year’s U.S. Supreme Court ruling in Citizens United. This ruling threw out a century-old ban on corporate spending around elections and empowered corporations to exert even more influence over the political process. Now money spent on campaign contributions, lobbying, and through other avenues of influence such as the American Legislative Exchange Council (ALEC) can be backed by millions spent on electioneering.

· From 2001 through June 2011, companies now engaged in fracking contributed $20.5 million to current members of Congress. Industry giving more than tripled from the 2001-02 election cycle, when $2 million was contributed, to the 2009-10 election cycle, when $6.8 million was contributed.

· These same companies spent $726 million on lobbying at the federal level from 2001 through September, 2011.

· Contributions heavily favored current members of Congress who voted for the 2005 Energy Policy Act, which exempted fracking from regulation under the Safe Drinking Water Act. Current members who voted for the bill received an average of $73,433, while those who voted against the bill received an average of $10,894.

· Current members of the Senate Committee on the Environment and Public Works have received a total of $1.4 million from the industry.

· Current members of the House Energy and Commerce Committee have received a total of $3.7 million from the industry. Chair Rep. Fred Upton (R-MI) has received $153,917 from the industry and Committee member Rep. Joe Barton (R-TX) is the single-biggest recipient of fracking money in Congress with $514,945.

· The natural gas industry’s fight against regulation has gotten important help at the state level from the American Legislative Exchange Council (ALEC). As documented in an August 2011 Common Cause report, ALEC generates and lobbies for hundreds of model bills every year despite its status as a tax-exempt 501 (c)(3) organization. Prominent financial backers of ALEC’s activities include the American Petroleum Institute, ExxonMobil, and Koch Industries, owner of the largest network of natural gas- transmitting pipelines in the country.

· The natural gas industry’s political expenditures have been used to target supporters of the FRAC Act, which would regulate fracking under the Safe Drinking Water Act and require disclosure of chemicals used in the fracking process. For example, in 2010, the industry gave $3 million to American Crossroads which in turn spent $533,000 in an attempt to defeat FRAC Act sponsor U.S. Rep. Maurice Hinchey (D-NY).

CAMPAIGN CONTRIBUTIONS:

Data was retrieved from the Federal Election Commission and represent contributions made from January 1, 2001 through June 30, 2011. Custom databases were built and searched for contributions relating to the PACs and employees of the relevant companies and organizations described in the list available at the below link.

Data was compiled using both the Senate's online Lobbying Disclosure Act Database and data from the Center for Responsive Politics. Lobbying figures included in this report represent expenditures from the start of 2001 through the end of Quarter 3, 2011.

“Climate is gone,” veteran political strategist Karl Rove announced at a 2010 conference of the oil and gas industry.3 Rove was referring to the results of the 2010 elections in which Republicans took control of the U.S. House—an election in which political committees controlled by Rove and aided by donations from oil and gas interests were a leading source of independent political expenditures.

Rove’s American Crossroads, a political action committee organized under laws that allow it to receive unlimited donations, has collected $2 million from Trevor Rees- Jones, Chairman of Chief Oil and Gas, and $1 million from Robert Rowling, Chairman of TNT Holdings, whose businesses include an oil and gas exploration firm. American Crossroads and Rove’s Crossroads Grassroots Political Strategies, or Crossroads GPS, a spin-off of American Crossroads organized as a non-profit 501(c)(4) organization and exempt from requirements that it reveal its donors, together accounted for $37.5 million of the $390 million in independent expenditures disclosed to the FEC in the 2009-10 election cycle. For the 2011-12 election cycle, these two groups have accounted for 28 percent—$1.2 million of $4.3 million— disclosed to the FEC as of October 2011.

Crossroads GPS is one of four groups whose tax-exempt status was challenged in a September 2011 letter to the IRS from the Campaign Legal Center and Democracy 21. “The idea that these organizations are social welfare groups is nonsense,” wrote Fred Wertheimer, President of Democracy 21. “The groups have sought tax-exempt status under section 501(c)(4) in order to keep secret from the American people the donors financing their campaign expenditures.”

Failure to Regulate:

When the EPA announced in 2000 that it was designing a study to investigate the potential for groundwater contamination from hydraulic fracturing, the United States Department of Energy warned that regulations could hinder economic growth in the industry.4 When released in 2004, the EPA study concluded that the process is environmentally harmless, and then-Vice President Dick Cheney and his former employer Halliburton used this finding to insert language into the 2005 Energy Policy Act to exempt fracking from regulation under the Safe Drinking Water Act. Current members of Congress who voted for this bill have received an average of $73,433 from industry, while current members who voted against the bill have received an average of $10,894.

When the EPA study was released in June 2004, many environmentalists criticized it for not adequately testing the potential for fracking to contaminate groundwater. Then, in October 2004, EPA environmental engineer Weston Wilson sought protection under the Federal Whistleblower Protection Act and charged that five of the seven members of the study’s external peer review panel of experts had conflicts of interest (three of those five were at the time employed by the gas industry) and criticized its authors for making no attempt to investigate the migration of methane as a result of fracking. Highlighting the fact that the agency could come to such concrete conclusions despite the fact that, as written in the report, the “EPA was unable to find complete chemical analyses of any fracturing fluids,” Wilson called the study’s findings “scientifically unsound and contrary to the purposes of the [Safe Drinking Water Act].”5

The industry’s exemption from the Safe Drinking Water Act has been called “the Halliburton loophole,” but the industry’s political influence runs much deeper. The New York Times has reported that the findings of a 1987 EPA study were also heavily influenced by the industry. ''It was like the science didn't matter. The industry was going to get what it wanted, and we were not supposed to stand in the way,” said Carla Greathouse, author of the 1987 EPA study.6 The Times has also noted that the industry is exempt from seven of the 15 major laws designed to protect air and water from contamination by harmful substances, including the Clean Air Act, Clean Water Act, and the Superfund Act.

''It was like the science didn't matter. The industry was going to get what it wanted, and we were not supposed to stand in the way.”

-Carla Greathouse, author of 1987EPA study

Can the Natural Gas Industry Regulate Itself?

The fight to keep fracking largely free from federal regulation has been led by some of the biggest recipients of fracking money in Congress. The FRAC Act, a bill that would eliminate the “Halliburton loophole,” remains bottled up in the House Energy & Commerce Committee, whose chair, Rep. Fred Upton (R-MI), has received $153,917 from the industry. After Secretary of the Interior Ken Salazar announced plans to regulate fracking through his department Rep. Dan Boren (D-OK) and Rep. Tim Murphy (R-PA), who co-chair the House Natural Gas Caucus, sent Salazar a letter in January 2011 urging him not to act until completion of a new study by the EPA.7 Boren ranks eighth among all members of Congress with $328,300 in contributions from companies engaged in fracking. Murphy ranks tenth with $275,499.8

Most recently, the Securities and Exchange Commission has stepped in and begun asking drillers to confidentially disclose which chemicals they are using in hydraulic fracturing as a way of determining these companies’ potential liabilities for fracking- related damage to the environment. Confidential disclosure addresses the industry’s long-standing objection to public release of proprietary information about fracking fluid. Yet even this modest step was opposed by Rep. Steve Pearce (R-NM) at a September 2011 hearing of the Committee on Financial Services. Pearce, whose campaigns have collected $351,650 from fracking interests, more than all but five other current lawmakers, suggested that SEC Chair Mary Schapiro’s concerns about having insufficient resources for her agency were ill-founded at a time when her agency was “drifting off into this environmental question.”9

Such extraordinarily lax government oversight leaves the industry, in many cases, free to regulate itself. But in May of this year, the shareholders of Chevron and ExxonMobil rejected proposals calling for more disclosure of the environmental impacts and risks of drilling for natural gas.10

Current members of Congress who voted for the “Halliburton loophole” have received an average of $73,433 from the industry, while current members who voted against the bill have received an average of $10,894.

The industry’s failure to abide by its promise not to use diesel fuel in fracking highlights the dangers of relying on self- regulation. In 2003, the EPA and the three major fracturing companies at the time (Halliburton, BJ Services, and Schlumberger) signed a voluntary memorandum of agreement (MOA) to discontinue the use of diesel fuel in fracking fluids. In an inquiry initiated by the Energy and Commerce Committee’s then-chairman, Rep. Henry Waxman (D-CA), Halliburton and BJ Services were found to have knowingly violated the MOA between 2005 and 2007; the committee concluded that the companies used fracking fluid with hundreds of thousands of gallons of diesel fuel containing chemicals that have confirmed negative health effects.11,12

Even after the EPA gained authority to regulate the use of diesel fuel in fracking fluids, Reps. Waxman, Edward J. Markey (D- MA), and Dianna DeGette (D-CO) discovered that the practice had continued in apparent violation of federal law. A letter released by the three in January 2011 stated: “The congressional investigation finds that oil and gas service companies have injected over 32 million gallons of diesel fuel or hydraulic fracturing fluids containing diesel fuel in wells in 19 states between 2005 and 2009. In addition, the investigation finds that no oil and gas service companies have sought – and no state and federal regulators have issued – permits for diesel fuel use in hydraulic fracturing, which appears to be a violation of the Safe Drinking Water Act.”

Even after the EPA gained authority to regulate the use of diesel fuel in fracking fluids, Reps. Waxman, Edward J. Markey (D- MA), and Dianna DeGette (D-CO) discovered that the practice had continued in apparent violation of federal law.

Regulation in the States

The natural gas industry’s success in Congress contrasts starkly with the “go slow” or “don’t go” approach that a growing number of state and local elected officials are taking toward fracking. New Jersey has imposed a one-year moratorium on fracking until its risks to the environment and human health can be further studied. New York imposed a six-month moratorium that expired in July 2011, while Maryland has effectively halted fracking by ordering a three-year environmental impact study. Several municipalities have banned fracking entirely, including Pittsburgh, PA; Albany, Ithaca, and Buffalo, NY; and Morgantown and Westover, West Virginia.

Two states that have long depended on oil and gas revenues, Texas and Wyoming, have taken the lead on requiring disclosure of fracking chemicals. Fracking using vertical wells has been conducted in both states since the 1950s, and unlike some states where the fracking boom is just beginning, both states have ample evidence of the threats to human health from drilling- related pollution.13,14 In 2010, Wyoming became the first state to issue regulations requiring disclosure of fracking chemicals. Meanwhile Texas, which has ranked as one of the worst states for per capita spending on maintaining water quality15, became the first state to pass a law requiring disclosure of fracking chemicals in June 2011.

Additional in-depth studies of the natural gas industry’s political spending in Pennsylvania, New York, Ohio, and Michigan are available at commoncause.org/fracking2012

Conclusion

The absence of strong federal regulation means that states with little or no fracking may still find their water supplies at risk of pollution produced outside their boundaries. In 2009, the group American Riverkeeper declared the Delaware River, which provides water to 15 million people in four states, to be the most endangered river in the country. In 2010, the group declared the Susquehanna River, which provides drinking water to six million people in Pennsylvania and Maryland, to be the most endangered.

The ability of the natural gas industry to tap vast new reserves through fracking is a good metaphor for its enhanced political clout in the post-Citizens United era, in which the industry and its backers can now spend unlimited amounts of money on electioneering, often in secret. A full and fair debate about the degree to which the natural gas industry should be more transparent about the chemicals used in fracking, and more forthcoming about their potential to damage the environment and human health, depends on forcing the industry to more fully disclose its political expenditures.

Recommendations

I. Independent political expenditures should be disclosed in a timely manner so the public can better understand their impact on Congressional elections.

II. As with all corporations, the shareholders of natural gas companies should have the right to approve or disapprove any political expenditures by their companies, and the extent of corporations’ political expenditures should be disclosed to their shareholders.

III. The U.S. Senate should join the U.S. House in requiring that reports of campaign contributions be filed electronically.About This Report

“Deep Drilling, Deep Pockets In Congress” was written and researched by James Browning and Alex Kaplan, with additional research by Jaron Raab and John Ammon. This is the third in a series of Common Cause studies of political spending by the natural gas industry.

The previous two studies of political spending by the industry in New York and Pennsylvania are available at www.commoncause.org/ny and www.commoncause.org/pa.